Opinion=20
issued December 13, 2007
In=20
The
Court of Appeals
For The
First District of =
Texas
NO. 01-06-00700-CV
__________
REECE =
ALBERT,=20
INC., Appellant
V.
CONTRACTOR=E2=80=99S=20
SERVICE COMPANY, Appellee
On =
Appeal from=20
the 133rd District Court
Harris =
County,=20
Texas
Trial =
Court Cause=20
No. 2005-39133
MEMORANDUM=20
OPINION
<=
/SPAN> In this contractual indemnity =
case, Reece=20
Albert, Inc. (=E2=80=9CReece=E2=80=9D) and Contractor=E2=80=99s =
Service Company (=E2=80=9CCSC=E2=80=9D) filed=20
cross-motions for summary judgment. In two issues, Reece appeals =
the trial=20
court=E2=80=99s grant of CSC=E2=80=99s motion and contends that =
(1) the trial court erred=20
in ruling that the parties=E2=80=99 indemnity agreement is =
ambiguous, and, thus,=20
unenforceable, and (2) the =
words=20
omitted from the =E2=80=9Ctrigger=E2=80=9D portion of the =
indemnity agreement were the=20
result of a scrivener=E2=80=99s error, which can be corrected =
through the doctrine=20
of reformation. We reverse.
Background
<=
/SPAN>Reece=20
and CSC entered into a contract, whereby CSC agreed to act as a=20
subcontractor for Reece on a road construction project in Nolan =
County,=20
Texas. Under the contract, =
CSC was to=20
provide signs, lights, and barricades and place them on the =
roadway=20
according to the specifications of the governing Traffic Control =
Plan.=20
During the course of the project, an automobile accident occurred =
in the=20
construction area.
<=
/SPAN>James=20
Neff, a driver involved in the collision, sued Reece and CSC, =
alleging=20
that the collision resulted from Reece=E2=80=99s and CSC=E2=80=99s =
failure to mark and=20
maintain the signs, barricades, and other traffic control devices =
in the=20
construction area. ![3DFootnote](3D"")
Pursuant to the indemnity =
agreement in the=20
contract between them, Reece made a demand on CSC for defense and=20
indemnity, but CSC did not respond to the demand. Reece incurred=20
$30,704.70 in defense costs, and, after mediation, settled with =
Neff for=20
$32,500.
<=
/SPAN>Reece=20
sued CSC, alleging breach of contract and seeking declaratory =
relief=20
regarding CSC=E2=80=99s defense and indemnity obligations. The =
indemnity provision=20
in question, found in the subcontract between Reece and CSC, reads =
as=20
follows:
9.9 INDEMNIFICATION AND HOLD HARMLESS=20
CLAUSE:
[CSC] assumes entire responsibility for =
any claim=20
or actions based on or arising out of injuries, including death, =
to=20
persons or damages to or destruction of property sustained or =
alleged=20
to have been sustained in connection with or to have arisen out of =
Reece=20
Albert Inc., their agents and employees, and their =
subcontractors,=20
their agents and employees, whether such claims or actions are =
founded in=20
whole or in part upon liability or any degree of alleged =
negligence,=20
whether sole or concurrent, of Reece Albert Inc. it=E2=80=99s =
[sic]=20
representatives, or the employees, agents, invitees, or licenses =
[sic]=20
thereof. [CSC] further agrees to indemnify and hold harmless Reece =
Albert=20
Inc. And [sic] it=E2=80=99s [sic] representatives, and the =
employees, agents,=20
invitees and licensees thereof in respect of any such matters and =
agrees=20
to defend any claim or suit or action brought against Reece Albert =
Inc.,=20
it=E2=80=99s [sic] representatives, and employees, agents, =
invitees, and licensees=20
thereof.
(Emphasis added.) The parties filed =
cross motions=20
for summary judgment and stipulated that the only questions for =
the trial=20
court to answer were (1) whether the indemnity =
=E2=80=9Ctrigger=E2=80=9D was ambiguous=20
and, (2) if it was, whether such ambiguity rendered the entire =
agreement=20
unenforceable under the express negligence test. The trial court found that the relevant =
=E2=80=9Cindemnity=20
provision is ambiguous and therefore unenforceable.=E2=80=9D Reece =
appealed.
Summary=20
Judgment
<=
/SPAN>A=20
summary judgment movant has the burden of showing that there is no =
genuine=20
issue of material fact and that it is entitled to summary judgment =
as a=20
matter of law. Tex. R. =
Civ.=20
P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d =
546,=20
548 (Tex. 1985). A plaintiff moving for summary judgment on its =
claim must=20
establish its right to summary judgment by conclusively proving =
all the=20
elements of its cause of action as a matter of law. =
Rhone-Poulenc, Inc.=20
v. Steel, 997 S.W.2d 217, 223 (Tex. 1999); Anglo-Dutch =
Petroleum=20
Int=E2=80=99l, Inc. v. Haskell, 193 S.W.3d 87, 95 (Tex. =
App.=E2=80=94Houston [1st=20
Dist.] 2006, pet. denied).
<=
/SPAN>When=20
a defendant moves for summary judgment, it must either (1) =
disprove at=20
least one element of the plaintiff=E2=80=99s cause of action or =
(2) plead and=20
conclusively establish each essential element of its affirmative =
defense,=20
thereby defeating the plaintiff=E2=80=99s cause of action. =
Cathey v. Booth,=20
900 S.W.2d 339, 341 (Tex. 1995); Yazdchi v. Bank One, Tex., =
N.A.,=20
177 S.W.3d 399, 404 (Tex. App.=E2=80=94Houston [1st Dist.] 2005, =
pet. denied).=20
Ambiguity
<=
/SPAN>In=20
two issues, Reece appeals the trial court=E2=80=99s grant of =
CSC=E2=80=99s motion and=20
contends that (1) the trial court erred in ruling that, as a =
matter of=20
law, the parties=E2=80=99 indemnity agreement is ambiguous, and, =
thus,=20
unenforceable and (2) the words omitted from the trigger portion =
of the=20
indemnity agreement were the result of a scrivener=E2=80=99s =
error, which can be=20
corrected through the doctrine of reformation. Despite raising =
multiple=20
grounds for summary judgment in their motions, CSC and Reece filed =
an=20
agreed stipulation in this appeal that
the only issues decided by the trial =
court and,=20
therefore, the only issues for this Court=E2=80=99s consideration =
upon appeal are=20
whether the indemnity trigger in the parties=E2=80=99 indemnity =
agreement (i.e.,=20
the portion of the indemnity agreement that describes the =
circumstances=20
under which CSC owed indemnity) is ambiguous, and, if it is, =
whether such=20
ambiguity renders unenforceable the parties=E2=80=99 entire =
indemnity agreement=20
under the express negligence test.
The=20
Law
<=
/SPAN>Because=20
indemnity provisions seek to shift the risk of one party=E2=80=99s =
future=20
negligence to the other party, Texas imposes a fair notice =
requirement=20
before enforcing such agreements. Dresser Indus., Inc. v. Page=20
Petroleum, Inc., 853 S.W.2d 505, 508 (Tex. 1993). The fair =
notice=20
requirements are embodied in the express negligence doctrine and =
the=20
conspicuousness requirement. Storage & Processors, Inc. v.=20
Reyes, 134 S.W.3d 190, 192 (Tex. 2004). Under the express =
negligence=20
doctrine, an intent to indemnify one of the parties from the =
consequences=20
of its own negligence, =E2=80=9Cmust be specifically stated in the =
four corners of=20
the document.=E2=80=9D Id. (quoting Ethyl Corp. v. =
Daniel Constr.=20
Co., 725 S.W.2d 705, 707 (Tex. 1987)). The conspicuousness =
requirement=20
mandates that =E2=80=9Csomething must appear on the face of the =
[contract] to=20
attract the attention of a reasonable person when he looks at =
it.=E2=80=9D=20
Id. (quoting Dresser, 853 S.W.2d at 508). Language =
is=20
conspicuous if it appears in larger type, contrasting colors, or =
otherwise=20
calls attention to itself. Dresser, 853 S.W.2d at 511; =
see=20
also Tex. Bus. & =
Com. Code=20
Ann. =C2=A7 1.201(b)(10) (Vernon Supp. 2007). Whether an =
agreement meets=20
the conspicuous requirement is a question of law for the court.=20
Dresser, 853 S.W.2d at 509. An agreement that does not =
=E2=80=9Csatisfy=20
either of the fair notice requirements when they are imposed is=20
unenforceable as a matter of law.=E2=80=9D Reyes, 134 =
S.W.3d at 192.=20
=E2=80=9CHowever, if both contracting parties have actual =
knowledge of the plan=E2=80=99s=20
terms, an agreement can be enforced even if the fair notice =
requirements=20
were not satisfied.=E2=80=9D Id.
<=
/SPAN>The=20
express negligence requirement is not an affirmative defense, but =
a rule=20
of contract interpretation which is determinable as a matter of =
law.=20
Fisk Elec. Co. v. Constructors & Assocs., 888 S.W.2d =
813, 814=20
(Tex. 1994). Such a determination does not depend on the =
outcome of=20
the underlying suit, but must be established as a matter of law =
from the=20
pleadings. Id. Therefore, the express negligence test may =
properly=20
be applied at the summary judgment stage of a proceeding. MAN =
GHH=20
Logistics GMBH v. Emscor, Inc., 858 S.W.2d 41, 43 (Tex. =
App.=E2=80=94Houston=20
[14th Dist.] 1993, no writ).
<=
/SPAN>Whether=20
a contract is ambiguous is a question of law for the court. =
Heritage=20
Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). If =
the=20
contract is so worded that it can be given a certain or definite =
legal=20
meaning or interpretation, then it is not ambiguous, and a court =
should=20
construe the contract as a matter of law. SAS Inst., Inc. v.=20
Breitenfeld, 167 S.W.3d 840, 841 (Tex. 2005). We construe an=20
unambiguous contract according to the plain meaning of its express =
wording. Lyons v. Montgomery, 701 S.W.2d 641, 643 (Tex. =
1985).=20
Unambiguous contracts are enforced as written. Heritage Res., =
Inc.,=20
939 S.W.2d at 121.
<=
/SPAN>=E2=80=9CA=20
contract is ambiguous when its meaning is uncertain and doubtful =
or is=20
reasonably susceptible to more than one interpretation.=E2=80=9D =
Id. We=20
determine whether a contract is ambiguous by looking at the =
contract as a=20
whole in light of the circumstances present when the parties =
entered the=20
contract. Universal Health Servs., Inc. v. Renaissance =
Women=E2=80=99s Group,=20
P.A., 121 S.W.3d 742, 746 (Tex. 2003). If a contract is =
determined to=20
be ambiguous, then a court may consider extraneous evidence to =
ascertain=20
the true meaning of the instrument. Nat=E2=80=99l Union Fire =
Ins. Co. v. CBI=20
Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995).
Analysis
<=
/SPAN>The=20
crux of the parties=E2=80=99 dispute over the enforceability of =
the indemnity=20
provision is found in the italicized portion below.
[CSC] assumes entire responsibility for =
any claim=20
or actions based on or arising out of injuries, including death, =
to=20
persons or damages to or destruction of property sustained or =
alleged=20
to have been sustained in connection with or to have arisen out of =
Reece=20
Albert Inc., their agents and employees, and their =
subcontractors,=20
their agents and employees, whether such claims or actions are =
founded in=20
whole or in part upon liability or any degree of alleged =
negligence,=20
whether sole or concurrent, of Reece Albert Inc. it=E2=80=99s =
[sic]=20
representatives, or the employees, agents, invitees, or licenses =
[sic]=20
thereof.
(Emphasis added.) CSC alleges that the =
entire=20
indemnity provision is unenforceable because the italicized =
portion of the=20
provision that describes the circumstances under which =
CSC=E2=80=99s indemnity=20
obligation is triggered is =E2=80=9Cambiguous and =
nonsensical.=E2=80=9D CSC argues that=20
the indemnity agreement is so broad that it would require CSC to =
insure=20
Reece for =E2=80=9Canything that could possibly happen during the =
massive road=20
construction project (or any other project for that matter, given =
Reece=E2=80=99s=20
interpretation), even if completely unrelated to any work provided =
by CSC=20
or involving injuries to third-persons not even associated with =
CSC.=E2=80=9D=20
Further, CSC contends that we cannot reform an ambiguous indemnity =
provision given that the Texas Supreme Court has directed that =
=E2=80=9Cindemnity=20
provisions that do not state the intent of the parties within the =
four=20
corners of the instrument are unenforceable as a matter of =
law.=E2=80=9D=20
Fisk, 888 S.W.2d at 814. We agree with CSC=E2=80=99s =
premise, but hold that=20
the parties=E2=80=99 intent is stated in the four corners of the =
instrument.=20
<=
/SPAN>Reece=20
concedes that =E2=80=9Cthere are admittedly one or more words =
missing from the=20
quoted indemnity trigger that should appear right before =
the words=20
=E2=80=98Reece Albert =
Inc.=E2=80=99=E2=80=9D=E2=80=94=E2=80=9Csustained or alleged to have =
been sustained in=20
connection with or to have arisen out of Reece Albert =
Inc.=E2=80=9D=20
Nonetheless, it is clear, =
reviewing=20
the entire indemnity agreement, that the parties intended CSC to =
indemnify=20
Reece for Reece=E2=80=99s own negligence. The agreement expressly =
provides that=20
CSC =E2=80=9Cassumes entire responsibility for any claim or =
actions . . . whether=20
such claims or actions are founded in whole or in part upon =
liability or=20
any degree of alleged negligence, whether sole or concurrent, of =
Reece=20
Albert Inc.=E2=80=9D
<=
/SPAN>CSC=20
argues that Reece erroneously attempts to =E2=80=9Cparse the =
indemnity agreement=20
into allegedly two separate and independent portions=E2=80=94the =
ambiguous=20
indemnity trigger and the indemnity undertaking.=E2=80=9D We need =
not address this=20
argument because, while there may be a few words missing from the=20
indemnity trigger, after considering the contract as a whole and =
in light=20
of the circumstances present when the parties entered into the =
contract,=20
its meaning is certain and is not reasonably susceptible to more =
than one=20
interpretation. See Universal Health Servs., 121 S.W.3d at=20
746.
<=
/SPAN>We=20
hold that the missing words in the indemnity trigger are the =
result of a=20
scrivener=E2=80=99s error. This decision is supported by the =
number of=20
typographical errors found in the one-paragraph provision. We =
agree that=20
the stated purpose of the express negligence test is =E2=80=9Cto =
require=20
scriveners to make it clear when the intent of the parties is to =
exculpate=20
an indemnitee for the indemnitee=E2=80=99s own =
negligence,=E2=80=9D Fisk, 888=20
S.W.2d 815, and we hold that the intent was clearly stated in the=20
provision. There is no ambiguity in CSC=E2=80=99s obligation to =
indemnify Reece=20
for Reece=E2=80=99s own negligence. Accordingly, we hold the trial =
court erred in=20
finding the indemnity provision ambiguous and =
unenforceable.
<=
/SPAN>Reformation=20
is a proper remedy when the parties have reached a definite and =
explicit=20
agreement, understood in the same sense by both, but, by their =
mutual or=20
common mistake, the written contract fails to express this =
agreement.=20
Champlin Oil & Ref. Co. v. Chastain, 403 S.W.2d 376, =
377 (Tex.=20
1965). Because the agreement embodies the parties=E2=80=99 intent =
to apply the=20
express negligence doctrine, but, due to a scrivener=E2=80=99s =
error, leaves out a=20
few words in the indemnity trigger, the matter must be remanded to =
the=20
trial court to reform the written contract to conform to the terms =
of the=20
agreement.
<=
/SPAN>We=20
sustain issues one and two.
Conclusion
=
We=20
reverse the trial court=E2=80=99s judgment and remand the cause =
for the trial=20
court to reform the indemnity trigger in the =
agreement.
=
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; George=20
C. Hanks, Jr.
=
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; Justice
Panel consists of =
Justices=20
Taft, Hanks, and=20
Higley. |